Mayors of C21 cities: Transferring TE services to municipalities a fine objective – implementation is lacking

Published: 22.6.2022 7.00Updated: 23.6.2022 5.45

The government proposal on legislation concerning the reform of public employment and business services (TE services) has been circulated in municipalities for commenting. In the reform, the organisation of the TE services will be transferred from the central government to the local governments. The mayors of the 21 largest cities in Finland (C21) find that the reform’s objectives are good, but also that the shortcomings in the implementation can be remedied before the government proposal moves to the Parliament.

Balance of power and responsibility

The C21 cities are in favour of the draft proposal’s objectives of increasing the impact of the TE services. This will be achieved best by bringing the services into the municipalities’ service ecosystem. It is a good premise that the power and responsibility for promoting employment would lie extensively with municipalities in the future.

However, contrary to what the government is proposing, it would be clearer that each municipality were simultaneously responsible for both funding and organising the operations. It is essential that municipalities be able to agree on cooperation regarding the TE services by using all forms of cooperation detailed in the Local Government Act. This will not affect residents’ opportunities to receive high-quality services across the country.

For the largest cities, we believe the best model is one where the responsibility for organising employment and business services applies to each municipality, says Kari Karjalainen, Mayor of Joensuu. Cities that would have a labour force of at least 20,000 persons could arrange the services independently, while smaller municipalities would agree on carrying out the tasks in cooperation with other municipalities. The combined labour force of the municipalities to agree on cooperation should be 20,000 persons, at a minimum.

It should also be remembered that the TE2024 reform will not solve all challenges related to the labour market. In addition to transferring the organisation responsibility, Finland will also need many other measures to support employment.

We should be ready to boldly manage the incentives and taxation of work if we want to raise Finland’s employment rate permanently up to the Nordic level. Municipalities’ financial responsibility for unemployment, which the new funding model will increase, and their ability to influence the development of employment should be balanced better. Municipalities should also receive better and more effective tools for managing employment, says Juhana Vartiainen, Mayor of Helsinki.

Funding should follow the development of the working-age population

It is stated in the government proposal that municipalities’ responsibility for paying unemployment allowances will double. The aim is to remedy this through a compensation model designed for funding. However, this solution would not follow the population development; instead, it would eventually direct funding away from growth centres, meaning the locations where both employed and unemployed persons concentrate. As such, the new funding model would move the cyclical risk from the central government to the municipal economy and distribute funding equally to municipalities with negative net migration in the future, even if their entire working-age population emigrated. This is not sustainable from the largest cities’ perspective.

In an economic recession, unemployment will increase in ways that public employment services can only partially influence. Municipalities should not depend on the central government’s charity, should the costs of unemployment allowances increase suddenly in the future. This is a significant shortcoming of the reform and its funding model, says Tomas Häyry, Mayor of Vaasa.

The cities demand that some of the social security costs of persons who have been unemployed for a long time be covered with funding from the wellbeing services counties.

We are concerned about the fact that, in the reform, no financial or legislative incentives have been set for the wellbeing services counties to take care of the social and healthcare services for unemployed persons and to help those with reduced ability to work to progress towards the labour market or, if necessary, disability pension. The new funding model is more about transferring social security costs from the central government to municipalities than any real incentive, says Päivi Laajala, Mayor of Oulu.

The calculations on the services’ funding should also be revised. According to the government proposal, a fourth of the TE services’ total funding would remain with the central government, even though almost all services would move to municipalities. From the cities’ perspective, this is unfounded. Sufficient funding must be ensured so that municipalities themselves will not need to finance the new costs of hiring the new personnel required and the other means of implementing the reform.

New solutions for a more effective and motivating system

The government should provide municipalities with all possible preconditions to build their own solutions to realise better customer service and service matching and increase the impact of the services. The law must obligate the Development and Administration Centre for ELY Centres and TE Offices (KEHA Centre) to cooperate extensively with municipalities. Customer data regarding both jobseekers and companies should be transferred between areas, and their purposes should be defined sufficiently broadly to be able to utilise the service ecosystem of municipalities extensively.

Municipalities should be given access to the income register as it is necessary for them to review the impact of their services for various customer segments. This is the only way to provide the most efficient and effective services and truly influence the growth of employment rates.

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The network of C21 mayors consists of the mayors of Helsinki, Espoo, Tampere, Vantaa, Oulu, Turku, Jyväskylä, Kuopio, Lahti, Kouvola, Pori, Joensuu, Lappeenranta, Hämeenlinna, Vaasa, Rovaniemi, Seinäjoki, Mikkeli, Kotka, Salo and Porvoo. This constant network of mayors supports discussions about city policies and the supervision of cities’ shared interests.

These cities have a total population of over three million people, 54% of Finland’s population, and almost two in three jobs in Finland are located there.

  • Employment